156 T.C. 3
Tax Ct.2021Background
- In 2015 petitioner Kirgizia Grajales received Form 1099-R reporting $9,026 in pension distributions but did not report them on her tax return.
- The Commissioner issued a notice of deficiency asserting the distributions were taxable and that a 10% additional tax under I.R.C. §72(t) applied.
- The parties agree only $908.62 of the distributions are includible in 2015 income.
- Grajales argued the §72(t) additional tax required written supervisory approval under I.R.C. §6751(b)(1) and thus could not be asserted because no approval was obtained.
- The Commissioner conceded no written approval was obtained but maintained §72(t) imposes a "tax," not a "penalty," "addition to tax," or "additional amount," so §6751(b) does not apply.
- The Tax Court held §72(t) is a "tax" for purposes of §6751(b)/(c) and sustained the 10% exaction ($90.86) on the agreed taxable amount; decision to be entered under Rule 155.
Issues
| Issue | Petitioner's Argument | Commissioner's Argument | Held |
|---|---|---|---|
| Whether the §72(t) 10% exaction requires written supervisory approval under §6751(b)(1) | Grajales: §72(t) is a "penalty" or "additional amount" under §6751(c), so written supervisory approval was required and lacking | Commissioner: §72(t) is a "tax," not a penalty/addition/additional amount, so §6751(b) is inapplicable | The court: §72(t) is a "tax" for purposes of §§6751(b)/(c); written supervisory approval not required and the 10% exaction applies ($90.86) |
Key Cases Cited
- El v. Commissioner, 144 T.C. 140 (2015) (characterizes sec. 72(t) exaction as a "tax" for statutory purposes)
- Williams v. Commissioner, 151 T.C. 1 (2018) (reiterates sec. 72(t) is a tax, not a penalty/addition/additional amount)
- Whistleblower 22716-13W v. Commissioner, 146 T.C. 84 (2016) (explains "additional amount" is a term of art referring to chapter 68 civil penalties)
- Frost v. Commissioner, 154 T.C. 23 (2020) (discusses burden of production for penalties and §6751(b) written approval)
- Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012) (an exaction may be styled differently in different contexts; use textual approach absent constitutional issues)